IMHO,if you are a decent directional trader you will be light years ahead in your vol trading.. It affords you the luxury of being less aggressive on ratios/split strike flys and enables you to keep your gamma in check... My style of Vol trading is super "labor" intensive and is much closer to market making. With very reasonable trading costs,I will probably end up giving 27% of profits ..And its EXHAUSTING... I admire guys like Minervini And as we all know,the grass is always greener on the other side.
For the more advanced stuff,I use Hoadleys program and its really more of an academic exercise,but its a starting point along with Vol cones etc. Most of my trades are skew bets,betting/praying on Sticky Delta and I am almost always long the wings,if for no other reason margin purposes..I tend to trade slightly OTM at the level I call the inflection point. Assuming Sticky Delta,should the market move in the direction of the "body" of my trade,the position should explode as opposed to implode. Its easy to simply look at a screen and eyeball what the spread should do assuming sticky delta.. As for forcast vol,its really more to see how much edge I believe the position has.I take my forcast vol,bump it up,and bump it down.If the position still has some theoretical edge,its a go.If it doest its a no go,or done in small size. What I do is very simple.I look for skew trades (with wings or limited risk),and plug in a single vol to see how the spread would be priced at a single flat vol. As long as you are long wings,I believe SKEW is an opportunity.
I look at Garch via Hoadly but as I mentioned its more of an academic exercise than an "indicator" I use to trade. I try to put on positions where I still have theoretical edge with shifts in a single forcast vol.. At that point,its a directional bet,hopefully with edge
I was speaking in general terms.. If you do ratio,being halfway human directionally affords the luxury of being lighter in the short wings
Yes,skew typically makes wings more expensive,but if the spread/fly has theoretical edge on a flat forecast vol,it's simply the cost of mitigating blowout and margin calls. I'll skip strikes if im good with the price of the embedded short vertical.. The wings also afford me the luxury of knowing precisely what my payout is vs my risk..